HBOS collapse: Ex-bosses face calls for City bans

James Crosby, Andy Hornby and Lord Stevenson

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Financial regulators should consider banning three top HBOS bankers from senior roles in the financial sector, an influential committee has said.

The Banking Standards Commission said former bosses Sir James Crosby, Andy Hornby and Lord Stevenson were guilty of a "colossal failure" of management.

HBOS collapsed in 2008, wiping out shareholders, costing thousands of jobs and forcing a £20.5bn taxpayer bailout.

On Friday, Sir James resigned as an adviser to investment firm Bridgepoint.

The BBC understands that he was asked to resign by the board of the private equity firm following the publication of the HBOS report.

So far, there has been no response from the three men to the findings.

Banking Standards Commission chair Andrew Tyrie says there had been "a colossal failure of leadership"

The Banking Standards Commission was set up to improve the UK's banking system following the 2008 financial crisis.

Its members are MPs, members of the House of Lords and the Archbishop of Canterbury.

Its report criticised the now-defunct City regulator the Financial Services Authority (FSA), saying the watchdog appeared "to have taken no steps to establish whether the former leaders of HBOS are fit and proper persons to hold the approved persons status elsewhere in the UK financial sector".

The Chief Secretary to the Treasury, Danny Alexander, said the government would consider whether more should be done to hold those responsible for HBOS's demise to account.

"Unfortunately, the regulatory regime that was in place at the time was nowhere near tough enough," he said.

"We're just taking action this week as a government to put in place a tougher, new regulatory regime to try and make sure that some of the mistakes that were made can't happen again."

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This report stands out as a cracking page-turner. It's because its authors have a cracking turn of phrase and because they have made it about the people at the top of HBOS, and their individual and collective roles in driving it spectacularly over a cliff ”

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The report, called An Accident Waiting to Happen, paints a damning picture of the management failures leading up to the collapse of the bank at the height of the UK's banking crisis.

It estimates that 96% of shareholder value was wiped out when the bank collapsed, costing taxpayers £20.5bn.

Lloyds Banking Group, formed from the merger of Lloyds TSB and HBOS in 2009, has since cut tens of thousands of jobs and remains 39% state-owned.

The banking crisis also precipitated the economic slump from which the UK is still struggling to recover.

The commission accused the bank of "reckless" lending policies that resulted in losses of £46bn.

Such losses would have led to insolvency, had the bank not been bailed out by the taxpayer and Lloyds TSB, the commission claimed.

'Too much risk'

The commission concluded that two former chief executives, Sir James Crosby and Andy Hornby, were mainly to blame for the collapse of the bank, together with its former chairman, Lord Stevenson.

"The primary responsibility for the downfall of HBOS should rest with Sir James Crosby, architect of the strategy that set the course for disaster, with Andy Hornby, who proved unable or unwilling to change course, and Lord Stevenson, who presided over the bank's board from its birth to its death," said the report.

"Lord Stevenson, in particular, has shown himself incapable of facing the realities of what placed the bank in jeopardy from that time until now."

In written evidence to the commission last December, Lord Stevenson admitted that the bank took on too much risk in the run-up to the 2008 financial crisis.

Who are the HBOS three?

Andy Hornby, chief executive of HBOS from 2006

  • Degree in English from Oxford University and MBA from Harvard Business School
  • 1996 - 1999: Senior roles at Asda, including managing director of the George clothing brand
  • 1999 - 2008: Senior roles at Halifax and later HBOS, becoming chief executive in 2006
  • 2009 - 2011: Chief executive of Alliance Boots
  • 2011 - Present: Chief executive of bookmakers Coral

Sir James Crosby, chief executive, HBOS chief executive from 2001 to 2006

  • 1994: Joins Halifax bank as managing director of Halifax Life after 20 years in financial services
  • 1999: Becomes chief executive of Halifax, and first chief executive of HBOS in 2001
  • 2004: Appointed a non-executive director of the Financial Services Authority (FSA), while still head of HBOS
  • 2007: Becomes deputy chairman of the FSA following resignation from HBOS in 2006
  • 2009: Resigns from FSA
  • 2006 - Present: takes on various roles including non-executive director of Compass Group, chairman of Mysis, a trustee of Cancer Research UK, and an advisory role at private equity firm Bridgepoint
  • 2013 - asked to resign by board of Bridgepoint

Lord Stevenson, chairman of HBOS from 2001 to 2008

  • Begins business career in the 1960s after leaving university
  • 1979 - Present: Takes on several non-executive directorships at companies including BskyB, Pearson, Manpower and Western Union.
  • 1997 - 1999: Knighted and later made a peer for life, taking a seat in the House of Lords
  • 1999: Appointed chairman of Halifax, and later HBOS after its formation in 2001
  • 2008: Stands down as chairman of HBOS
  • Presently director of Cloaca Maxima, a consultancy, and non-executive director of Waterstone's

The former head of wholesale banking at HBOS, Peter Cummings, was fined £500,000 and banned from working in senior financial roles by the FSA last year.

But the Commission expressed surprise that no-one else had been punished.

While the three executives saw their "Approved Person" status at HBOS lapsing, they did not face any further sanctions.

An Approved Person is someone who is permitted to carry out particular financial functions by the FSA.

"The FSA appears to have taken no steps to establish whether they are fit and proper persons to hold Approved Person status elsewhere in the UK financial sector," said the report.

Flawed strategy

The report said the strategy set by the board after 2001 "sowed the seeds of its destruction".

That was the year in which the Halifax and the Bank of Scotland agreed to merge, forming HBOS.

Its losses of £46bn included losses of £25bn in its corporate division, and £14.5bn in Australia and Ireland.

Senior executives of HBOS tried to blame the losses on the temporary closure of wholesale markets.

During the financial crisis, banks stopped lending to each other, resulting in their short-term supplies of funding drying up.

But members of the commission said they were disappointed by such explanations, as it was the lending approach that was to blame.

"This culture was brash, underpinned by a belief that the growing market share was due to a special set of skills, which HBOS possessed and which its competitors lacked," said the report.

"This was a traditional bank failure, pure and simple. It was a case of a bank pursuing traditional banking activities and pursuing them badly."

Lloyds Banking Group stressed that the relevant events happened before it owned HBOS.

"We continue to focus our efforts on rebuilding the group for the benefit of our customers, employees and shareholders," its spokesperson said.

Ray Perman, the author of Hubris: How HBOS Wrecked the Best Bank in Britain, said the commission's criticism was unusual in singling out individuals.

"For the first time, blame is squarely pinned on the people who deserve it - the chairman, the two chief executives," he said.

"What they did was to pursue a very fast growth strategy, regardless of the risk and they fooled themselves into thinking that their initial success was [because] they were better than everybody else, but eventually those risks caught up with them."

Failure of regulation

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It is unprecedented for MPs and peers to suggest that a group of senior bankers should be banned from working in the City”

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The commission said the FSA's regulation of HBOS was "thoroughly inadequate".

In the three years following the merger, it said, the regulator managed to identify some of the issues that would contribute to the group's downfall, such as its aggressive pace of growth and its reliance on wholesale funding, as opposed to using its own savers' deposits.

But it failed to follow through on these concerns and was too easily satisfied that they had been resolved.

From 2004 to 2007, the FSA was "not so much the dog that did not bark, as a dog barking up the wrong tree", claimed the report.

There was too much supervision at a low level and too much box-ticking, it said.

The report requires the FSA to answer nine questions about its failures. But since the FSA was abolished five days ago, on 1 April, it will not be able to do so.

Instead, its replacement, the Prudential Regulation Authority, said it would be studying the report, "to ensure that the lessons from the failings at HBOS have been fully learned".

A further report into the collapse of HBOS, started by the now disbanded FSA, will be completed by a new regulator, the Financial Conduct Authority.


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  • rate this

    Comment number 393.

    None of these people 'earn' what they are 'paid'. They are lucky enough to work in an industry which has lots of money passing through; the industry has decided that they have the right to cream off a percentage of that money, and those at the top help themselves to a handome share. People working at the Royal Mint have just as much right to huge salaries and bonusses.

  • rate this

    Comment number 392.

    4 Minutes ago

    The real culprits are the politicians and the regulators who allowed the banks the freedom to take grossly inappropriate risks.


    Ridiculous. That`s like saying the police are to blame for their being criminals.These people are adults and claim to be banking experts so the responsibility lies with them to be just that, responsible. Sadly they were not

  • rate this

    Comment number 391.

    Isn't it remarkable that at this late date they're just talking about banning these fools? Shouldn't they all have been banned a month after they destroyed their banks and destabilised the world economy? By now, the debate should be around criminal prosecution, not a ban. Just another example of how the toffs running our government are out of touch with any reality but that of the Ascot set.

  • Comment number 390.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this

    Comment number 389.

    City Ban?, More like jail term, and an end to obscene bonuses and pay for the lot of them.
    All in it together my backside.

  • rate this

    Comment number 388.

    PC Myers @234
    "loco 'em up"
    Or invite to join humans race?
    A new life contributing & sharing
    Perhaps NOT as bankers?

    The Ace Face @239
    "bloodlust is sickening"
    And the issue evasion!

    Confuciousfred @241
    "I don't want risk takers
    I want money makers"
    To find them, take a risk!
    BUT make the Equal Partners
    All to SHARE in aggregate performance

  • rate this

    Comment number 387.

    Would someone please tell the author of post 346, Ephemeral Deception, what the 'S' in HBOS and in RBS stands for?

  • rate this

    Comment number 386.

    Post 346. The reason why it is top story in Scotland is because Halifax Bank of Scotland plc was one of the two banks who effectively monopolised commercial and private banking in Scotland.
    The other was Royal Bank of Scotland and that ended well as well didn't it!

  • rate this

    Comment number 385.

    It is not just these people who rightly should never be employed in a position of corporate governess again. But what about public service managers in the NHS, local government and elsewhere who have made complete messes of their work only to be paid off with vast sums in redundancies or severance.

  • rate this

    Comment number 384.

    If I were sitting on an Inquiry panel, the first question I would ask these three - and many other bankers at the top - is what professional qualifications they obtained in order to do and understand their jobs. The last thirty years have seen the dilution of specialized banking examinations, replaced by accountants and insurance salesmen who were selling double-glazing the week before.

  • rate this

    Comment number 383.

    Forget about the Phillpots Gideon, why don't we have a debate about how these 3 cost us 20Bn?
    or about the entitlement culture amongst the elite? or the bankers on the welfare tit?

    Thought not.

    They caused this mess by lending money they didn't have to people who couldn't afford it.

    Banned from the city? They should be in jail, or scratching in the dirt for tubers.

    'all in this together'

  • rate this

    Comment number 382.

    This is what I said in February 2009. When I met James Crosby in 2000 I was concerned about all the bankers at an awards lunch talking about getting permission to lend more money. When I told James that the trouble with lending money is that it had to be paid back he said that unlike a Life Company (I was based at Clerical Medical) a bank made money by lending it. I called him Mr Non Compliant.

  • rate this

    Comment number 381.

    Whilst there should be consequences to their collective failures it, seems a bit piecemeal picking on these three. The FSA, high ranking members of the treasury and members of the previous government are all culpable as well - some of these should be barred from working in the financial sector as well, even if it causes issues for members of the shadow (future) cabinet.

    I doubt it though.

  • Comment number 380.

    All this user's posts have been removed.Why?

  • rate this

    Comment number 379.

    This is the tip of an employment iceberg. From Bankers, BBC, Football managers and even NHS and council managers etc.. The apparent price of failure is a large "goodbye" and an equally large "hello". One might as well ignore the trite opinion about CV's, all you need is "I have held an overpaid job and failed"
    And apart from the good excuse for a whinge, what will change?

  • rate this

    Comment number 378.

    A quick check of the gov website says a director must (by law):

    "make sure the company’s accounts are a ‘true and fair view’ of the business’ finances"...and
    "make decisions for the benefit of the company, not yourself"

    Surely they breached at least one of these?

  • rate this

    Comment number 377.

    Are these the type of bankers that George Osborne thinks will leave the country if we regulate banking and bonuses?

    Not a great loss in my opinion.

  • rate this

    Comment number 376.

    How can we possibly keep the immense talent working in the City if they are subject to consequences of bad decision making? They'll simply leave this country and work for banks abroad. They need to know that they will be richly rewarded for making decisions, both good and bad, with our money rather than suffer penalties. How else can they be motivated except by envy and greed?

  • rate this

    Comment number 375.

    Maybe it should be a law that no MP may take a job or directorship in the financial sector - it's where many of them go when they drop out of parliament and so they have a vested interest in preserving the status quo.

    As for the senior people who presided over the near ruin of this bank, Iceland showed the way as far as dealing with this situation.

  • rate this

    Comment number 374.

    Remember the people mentioned in this report were only the CEO and Chairman
    HBOS and RBS both had full boards of directors, who were awarded outrageous bonuses, and royal titles, for services to banking, between 2001/07
    None of these directors have been exposed, but they are equally culpable, for the excessive risks which were taken.
    Some of these OBEs, are still in banking!!!!!!


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